Deutsche Bank: Indonesia Prone to Overheating

VIVAnews – The government must anticipate the possible overheating which may hit in 2012. Overheating occurs due to high consumption, stable market condition and low interest rate. 

“With Indonesia’s stable market condition, the government must be aware of overheating following overdemand,” said Chief Economist at Deutsche Bank for Indonesia, Taimur Baig, today. 

An overdemand in imports will also cause overheating, which would affect exchange rates and property crisis. Such countries such as Hong Kong and China are also dealing with property crisis. 

Overheating may cause high inflation risk.  With the subsidized fuel restriction, inflation rate may rise from 4 percent to 6 percent this year. 

He also said that if credit growth increases twice faster than the growth of gross domestic product (PDB), then it will be dangerous. “30 percent of credit growth is dangerous.  It is a sign of overheating,” he said. 

Taimur estimated that in the midst of slow global economic growth, Indonesia will grow 6 percent this year. 

The weakening commodity market will not stop the economy from growing. This will boost consumption and investment growth, and create job opportunities in 2012. Net commodity of exports towards the economic growth will fall in 2012. However, he estimated that the decline will not exceed 0.5 percent against PDB growth.